Recently in the beginning of 2009, the government of India further relaxed the norms for foreign direct investment (FDI) in various sectors. As per new norms, various sectors such as commodity exchanges, credit information and aircraft maintenance are opened for overseas investors while hiking the ceiling for investment in public sector oil refineries.
Revised FDI policy would now permit 100 per cent foreign investment in maintenance, repair and overhauling (MRO) facilities for aircraft as also aviation training units.
100% Foreign investment will henceforth be permitted in mining of titanium bearing minerals and up to 49 per cent in credit information companies. However, for investment in credit information companies, the permission of the Reserve Bank of India (RBI) will be necessary.
The new FDI policy has also done away with the norms of 26 per cent compulsory equity divestment in fuel and gas trading ventures. Hitherto, 100 per cent FDI was allowed on the automatic approval route, subject to the condition that 26 per cent equity in such ventures is disinvested within five years in favour of an Indian partner.
FDI in public sector refineries has also been raised to 49 per cent from its existing cap of 26 per cent.
In order to strengthen the industrial sector, the Cabinet also decided to exempt foreign investors from certain regulatory norms such as minimum capitalization and the three-year lock-in period. Alongside, for construction development projects, investments by registered foreign institutional investors (FIIs) under the portfolio investment scheme are also to be treated as distinct from FDI. In effect, the investments by FIIs would now be outside the purview of certain restrictive norms applicable to FDI. However, the government is to provide a detailed clarification in this regard later.
Scope for higher FDI
49 per cent FDI ceiling for commodity exchanges has further been divided.
While the investment ceiling for FDI has been pegged at up to 26 per cent that for FIIs has been fixed at 23 per cent, subject to the condition that no single investor would be permitted to hold a stake of more than five per cent.
Revised FDI policy would now permit 100 per cent foreign investment in maintenance, repair and overhauling (MRO) facilities for aircraft as also aviation training units.
100% Foreign investment will henceforth be permitted in mining of titanium bearing minerals and up to 49 per cent in credit information companies. However, for investment in credit information companies, the permission of the Reserve Bank of India (RBI) will be necessary.
The new FDI policy has also done away with the norms of 26 per cent compulsory equity divestment in fuel and gas trading ventures. Hitherto, 100 per cent FDI was allowed on the automatic approval route, subject to the condition that 26 per cent equity in such ventures is disinvested within five years in favour of an Indian partner.
FDI in public sector refineries has also been raised to 49 per cent from its existing cap of 26 per cent.
In order to strengthen the industrial sector, the Cabinet also decided to exempt foreign investors from certain regulatory norms such as minimum capitalization and the three-year lock-in period. Alongside, for construction development projects, investments by registered foreign institutional investors (FIIs) under the portfolio investment scheme are also to be treated as distinct from FDI. In effect, the investments by FIIs would now be outside the purview of certain restrictive norms applicable to FDI. However, the government is to provide a detailed clarification in this regard later.
Scope for higher FDI
49 per cent FDI ceiling for commodity exchanges has further been divided.
While the investment ceiling for FDI has been pegged at up to 26 per cent that for FIIs has been fixed at 23 per cent, subject to the condition that no single investor would be permitted to hold a stake of more than five per cent.
For in credit information services (CICs) companies, FIIs would be allowed to invest up to 24 per cent in firms listed on the stock exchanges and this would have to be within the 49 per cent ceiling. Apart from this, ‘Credit Reference Agencies’ are to be deleted from the list of non-banking finance companies (NBFCs) activities permitted for FDI up to 100 per cent under the automatic route.
Regarding the civil aviation sector, the existing FDI cap at 49 per cent on the automatic route and 100 per cent for NRIs is to continue with no direct or indirect participation by foreign airlines and it has been reclassified as ‘Domestic Scheduled Passenger Airline’ sector. For non-scheduled airlines, chartered and cargo airlines, the FDI cap is at 74 per cent on the automatic route and 100 per cent for NRIs. The same norms are to apply for ground handling services. Subject to sectoral regulations and security clearance.
Considered as one of the most favourite investment destinations, the FDI inflow into is expected to touch $ 30 billion this fiscal year (2009-2010)
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